European Factors to Watch - China gloom sets up shares for lower start

Wednesday, 3 Oct 2012 | 2:38 AM ET

SHARES

(Adds futures, live quote, company news)

LONDON, Oct 3 (Reuters) - European stocks were set for a slightly lower open on Wednesday as new gloomy economic data and uncertainty about Spain's debt crisis eclipsed underlying optimism about coordinated monetary support from central banks across the world.

At 0626 GMT, futures for the Euro STOXX 50

were down 0.3 percent, contracts on Germany's DAX were down 0.2 percent, while futures on France's CAC

Denting sentiment on Wednesday was fresh evidence about the extent of the Chinese economic slowdown and its impact on global growth at a time of political uncertainty in Beijing, where President Hu Jintao, Premier Wen Jiabao and other long-standing leaders are set to give up their main party posts next month.

China's official purchasing managers' index for the services sector fell in September, putting the world's second-largest economy on course for a seventh straight quarter of slowdown. Weak demand from China also took its toll on Australia, sending the Australian trade deficit to its widest in 3-1/2 years in August.

"The Chinese economic readings are close to reaching a level where the government will have no other choice than putting substantially more stimulus in the economy, but there is the risk that until the power struggle is resolved Beijing will be a bit of a lame duck," Markus Huber, a senior trader at ETX Capital, said.

Adding to investor caution, Spanish Prime Minister Mariano Rajoy poured cold water on speculation Madrid was close to applying for a bailout, saying any request was not imminent. Madrid needs to ask for international help if it is to receive support from the European Central Bank.

"As markets wait for Spain to formally request bailout funds which in turn would trigger ECB peripheral bond purchases, patience is running thin," Credit Agricole said in a note.

European shares have been slowly but steadily losing ground since hitting a 14-month high in mid-September as a rally spurred by global monetary stimulus was curbed by a run of gloomy economic news.

Euro zone services data due on Wednesday was expected to suggest the area likely slipped back into recession in the third quarter, with the services Purchasing Managers' Index (PMI) seen at 46 and the composite PMI seen at 45.9in September, where a reading below 50 indicated contraction.

The Oslo-listed oil driller said it plans to replace Chief Executive Alf Thorkildsen with Fredrik Halvorsen, the head of its Archer

affiliate, and is looking to relocate management outside Norway.

Seadrill said managing the company from the Norwegian city of Stavanger may constrain its aggressive growth plans, and that it was considering several locations including London, Dubai, Singapore and Houston.

TRANSOCEAN :

A Brazilian court overturned a ban on operations by offshore drilling contractor Transocean Ltd, accepting government arguments that the ban could cause billions of dollars in lost taxes for the government and output for the state-led oil firm Petrobras

. AREVA

French nuclear group Areva and China's Guangdong Nuclear Power Corporation Holding (CGNPC) have walked away from the UK's 6-gigawatt Horizon project, the Financial Times reported on Wednesday.

NOKIA

The struggling phone maker is seeking to sell its headquarters in Espoo, Finland as part of its drive to sell non-core assets. Iltasanomat newspaper said the building would be valued at 200-300 million euros ($259-$388 million).

SANOFI

Drugmakers Sanofi and Bristol-Myers Squibb

said they plan to restructure their alliance from Jan. 1 to respond to the loss of exclusivity on two key drugs and the arrival of generic competition in many major markets.

Lonza and U.S. biopharma company Celladon Corp announced an agreement, according to which Lonza will manufacture cGMP-grade MYDICAR enzymes for use in future clinical trials.

SPANISH BANKS

Spanish Economy Minister Luis de Guindos will appear in parliament at 0800 GMT to talk about the stress tests carried out on the banking sector by Oliver Wyman. Results of the test were released on Friday. Investors will watch for details on how the bad bank will be constructed, especially at what price assets will be transferred.

UBS :

UBS on Monday lost a bid to suspend a federal regulator's lawsuit accusing it of misleading Fannie Mae

and Freddie Mac into buying billions of dollars of risky mortgage debt. RICHEMOENT

Richemont said it has fully acquired VVSA, a Swiss high-end manufacture of stamped exterior components for watches, gold refiner and producer of semi-finished precious metal products destined for the watch and jewellery industry.

ACERINOX

Spanish steel producer Acerinox holds an investor day after raising its base prices by 50 euros ($64.53) per tonne in Europe on Tuesday.